Adidas taps star power to boost sales

Adidas reported 27 per cent growth for its North American revenue last month.
Adidas reported 27 per cent growth for its North American revenue last month.PHOTO: INSTAGRAM/ADIDAS

HOUSTON • For February's NBA All-Star Weekend basketball showcase in Los Angeles, Adidas rented space at 747 Warehouse Street.

Over the course of two days, tens of thousands of people wandered through the venue - which had a full-sized basketball court, a pop-up design studio, food stations and a sneaker pick-up point.

Sponsored stars also stopped by, including the Houston Rockets' James Harden and rapper Kanye West, who gave an impromptu gig.

"Fifteen or 20 hip-hop bands and athletes and basketball... It was a celebration," said Mr Mark King, president of Adidas North America.

He has reason to be chirpy. Since he took over in 2014, Adidas has more than doubled its North American market share. Last month, it released its 2017 annual report showing that North American revenue grew 27 per cent - compared with 3 per cent for Nike.

The success did not come overnight of course. Starting in the 1920s, brothers Adolf and Rudolf Dassler made shoes in the small German town of Herzogenaurach. In 1948, they had a falling out - with Rudolf starting what would become Puma and Adolf founding Adidas.

In 1954, Germany won the football World Cup wearing Adidas boots and the brand took off. It also saw some success in the American market.

By 1984, Adidas was the front-runner to sign a highly touted NBA draft pick named Michael Jordan.

Instead, Nike swooped in and made a now-famous deal that propelled it to the top of what has since been dubbed the "sneaker wars".

Adidas has been stuck in second (or worse) for decades.

Part of its problem, analysts said, was that it was designing for a European audience. Beginning in 2014, the company rebooted its strategy, moving some 200 top employees from Germany to the United States - including lead designer Paul Gaudio - and investing millions in the American market.

It also launched a shoe design hub in Brooklyn and a robotic "speedfactory" in Atlanta and has plans to expand its North American headquarters in Portland, Oregon.

Recent growth also got a spring from Adidas' introduction of its Boost midsole technology in 2013.

Designed in conjunction with German chemical company BASF, Boost is squishy foam cushioning that is layered into the shoe to increase comfort and energy transfer.

Boost has since been integrated into myriad Adidas' products, from lifestyle to running shoes.

Mr John Horan, founder of Sporting Goods Intelligence, an industry analysis firm, calls the technology "comfortable as hell". But at first, sales were sluggish. Adidas took out its cheque-book and went looking for talent.

Since 2014, it has quadrupled its presence among Major League Baseball players. On the basketball court, its mega deal with then-Chicago Bulls star Derrick Rose was dented by his injury woes, but that did not stop the company from luring Harden away from Nike in 2015 for US$200 million (S$260 million). This season, he is the front-runner for the NBA's most valuable player.

"It's always great when you have a brand that wants you and will do whatever it takes to get you and market you the right way," Harden told ESPN. "I have a voice that can and will be heard."

Adidas has been making even bigger bets on the entertainment side.

It has added singer Pharrell Williams, model Kendall Jenner and West, whose 2016 deal could end up being worth more than US$1 billion.

West, in particular, has been a standout for the company.

Before he wore all-white Energy Boost sneakers at a concert, the shoes were not doing particularly well. After the performance - as photos of West circulated on the Internet - the product sold out. About a week later, he did the same thing with the Ultra Boost shoe.

While Adidas' American market share has climbed to around 11 per cent, the sneaker war is not a walkover for the company just yet since Nike has a roughly 37 per cent share.

But Nike will need to find new booster shots for Mr Jeff McGillis, Adidas' head of US team sports, warned: "We're not here to finish second."

WASHINGTON POST

A version of this article appeared in the print edition of The Straits Times on April 04, 2018, with the headline 'Adidas taps star power to boost sales'. Print Edition | Subscribe